State Tax Commission of Missouri

KCS LLC, )

)

Complainant, )

)

v. ) Appeal Number 05-10739

)

PHILIP MUEHLHEAUSLER, ASSESSOR, )

ST. LOUIS COUNTY, MISSOURI, )

)

Respondent. )

DECISION AND ORDER

HOLDING

Decision of the St. Louis County Board of Equalization sustaining the assessment made by the Assessor, SET ASIDE. Hearing Officer finds true value in money for the subject property for tax years 2005 and 2006 to be $69,000, assessed value of $13,110.

Complainant appeared By Counsel, Eric Tolen, Clayton, Missouri.

Respondent appeared by Counsel, Paula J. Lemerman, Associate County Counselor.

Case heard and decided by Senior Hearing Officer W. B. Tichenor.

ISSUE

The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2005.

SUMMARY

Complainant appeals, on the ground of overvaluation, the decision of the St. Louis County Board of Equalization, which sustained the valuation of the subject property. The Assessor determined an appraised value of $76,800 assessed value of $14,590, as residential property. Complainant proposed a value of $20,000 assessed value of $3,800. Respondent proposed a value of $69,000, assessed value of $13,110. A hearing was conducted on June 7, 2006, at the St. Louis County Government Center, Clayton, Missouri.

The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

Complainant’s Evidence

Complainant offered the testimony of Charles Karam, a principal in Complainant. Mr. Karam is a home builder and developer. He testified as to the poor condition of the subject home and the various items of deferred maintenance. Mr. Karam also testified that because the property was purchased at a tax sale that it would be necessary to institute a quiet title action to obtain title on which a title company would issue title insurance. He testified as to other matters of litigation regarding the property.

Respondent’s Evidence

Respondent placed into evidence the testimony of Mr. Bo Frumson, State Certified General Real Estate Appraiser for St. Louis County. The appraiser testified as to his appraisal of the subject property. The Appraisal Report, Exhibit 1, of Mr. Frumson was received into evidence. Mr. Frumson arrived at an opinion of value for the subject property of $69,000 based upon a sales comparison approach to value. In performing his sales comparison analysis, the appraiser relied upon the sales of three properties which he deemed to be comparable to the subject property. Exhibit 2 – a copy of the MLS listing (spawn) sheet on the subject property was received into evidence, over the objection of Complainant’s Counsel on the ground of hearsay and lack of authentication.

FINDINGS OF FACT

1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the St. Louis County Board of Equalization.

2. The subject property is located at 10239 Driver Drive, Overland, Missouri. The property is identified by locator number 15 L 410378. The property consists of .1837 of an acre lot (8,000 square feet) improved by a brick masonry, cottage/bungalow style single-family dwelling. The house was built in 1936. It has a total of five rooms, with two bedrooms and one and a half baths. The house has a total of 728 square feet of gross living area. There is a full, partially finished basement containing 150 square feet of finished space. There is a two car detached garage. Exhibit 1. The home suffers from various items of deferred maintenance relating to painting, guttering, plumbing and driveway repairs. Testimony of Mr. Karam.

3. There was no evidence of new construction and improvement from January 1, 2005, to January 1, 2006.

4. Complainant’s evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the true value in money as of January 1, 2005, to be $20,000, as proposed.

5. The property was listed for sale by one of the principles in Complainant (Sage Cangin), a licensed real estate agent, in 2005 for $88,000. Exhibit 1, p. 7, Exhibit 2, Testimony of Mr. Frumson, Testimony of Mr. Karam. This listing for sale while not establishing fair market value by itself, does result in a negative inference against the Complainant’s claim of a value of only $20,000.

6. The properties relied upon by Respondent’s appraiser in performing his appraisal were comparable to the subject property for the purpose of making a determination of value of the subject property. The three properties were located next door, across the street and a quarter mile west of the subject on the subject street. Each sale property sold at a time relevant to the tax date of January 1, 2005. The sale properties were similar to the subject in style, quality of construction, age, condition, room, bedroom and bathroom count, living area, location, site size and other amenities of comparability. The appraiser properly adjusted comparables 1 and 2 for their superior condition. No such adjustment was necessary for comparable 3.

7. Respondent’s evidence met the standard of substantial and persuasive to rebut the presumptions of correct assessment and establish the value of the subject, as of January 1, 2005, to be $69,000.

The presumption in favor of the Board is not evidence. A presumption simply accepts something as true without any substantial proof to the contrary. In an evidentiary hearing before the Commission, the valuation determined by the Board, even if simply to sustain the value made by the Assessor, is accepted as true only until and so long as there is no substantial evidence to the contrary.

The Supreme Court of Missouri has held, “A tax assessor’s valuation is presumed correct.” Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341 (Mo. 2005). Citing to Hermel, supra; and Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

The presumption of correct assessment is rebutted when the taxpayer or the Respondent presents substantial and persuasive evidence to establish that the assessor’s or Board’s valuation is erroneous and what the fair market value should have been placed on the property. Snider, Hermel & Cupples Hesse, supra.

Standard for Valuation

Section 137.115, RSMo, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so. St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993). It is the fair market value of the subject property on the valuation date. Hermel, supra.

Market Value

Market value is the most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.

Implicit in this definition is the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:

1. Buyer and seller are typically motivated.

2. Both parties are well informed and well advised, and each acting in what they consider their own best interests.

In order to prevail, Complainant must present an opinion of market value and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on January 1, 2005. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, at 897. Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975). See also, Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003).

Complainant has failed to meet its required burden of proof. The testimony of Mr. Karam, as a principal in Complainant can be treated as the opinion of the owner. The owner of property is generally held competent to testify to its reasonable market value. Boten v. Brecklein, 452 S.W.2d 86, 95 (Sup. 1970). The owner’s opinion is without probative value however, where it is shown to have been based upon improper elements or an improper foundation. Shelby County R-4 School District v. Hermann, 392 S.W.2d 609, 613 (Sup. 1965). In the present appeal, the owner’s opinion was not demonstrated to have been based upon proper elements or a proper foundation. Therefore no probative value can be given to it.

Deferred Maintenance

Mr. Karam testified as to the general condition of the subject house which is in need of various repair items to address matters of deferred maintenance. However, nothing was presented by Complainant in the form of any recognized appraisal methodology or other supporting documentation by which the Hearing Officer might be able to arrive at fair market value for the property. A taxpayer does not meet his burden if evidence on any essential element of his case leaves the Commission “in the nebulous twilight of speculation, conjecture and surmise.” See, Rossman v. G.G.C. Corp. Of Missouri, 596 S.W.2d 469, 471 (Mo. App. 1980).

On the issue of the condition of the home, Complainant was satisfied to simply describe the various repair problems and conclude this reduced the value of the home. However, as to the cost of repairs or the monetary reduction in value due to the deferred maintenance there was nothing presented upon which the Hearing Officer could make a reasoned determination of value. Deferred maintenance issues, of course, impact on the value of a property. However, if the property under appeal is being compared to properties which have similar deferred maintenance factors, then little or no adjustment is necessary. If comparable sale properties do not have similar deferred maintenance issues, then an adjustment must be made to account for condition.

Complainant elected to present no sales data on similar properties or market data from which an adjustment might be made for condition. In other words, the Hearing Officer was expected to conclude the owner’s opinion of value was fair market value, based simply on the owner’s assertion and no other documentation. Under Complainant’s evidence, the issue of the financial impact of the deferred maintenance was left to conjecture and speculation. The Hearing Officer cannot render a decision based upon such elements.

Respondent’s appraiser recognized the inferior condition of the subject when performing his sales comparison analysis. He adjusted for the condition of his comparables as he deemed necessary based upon the best available information at his disposal, i.e. exterior inspection of subject and comparables and verification as to comparables condition from sales agents or owners. This was the only viable evidence on the record which properly addressed the deferred maintenance factor.

Collector’s Deed and Quiet Title Action

Complainant, through the testimony of Mr. Karam, also argued that because Complainant’s title came by way of purchase at a tax sale and a Collector’s Deed, that there is no marketable title and therefore the property cannot be worth more than what was paid for it at the tax sale. Complainant’s theory is not persuasive. Complainant asserts that since no title company will issue title insurance, that no buyer will buy the property until there is a quiet title action. The Hearing Officer assumes for the purposes of this Decision that in point of fact title companies in the St. Louis Metropolitan area will not issue title insurance based upon a Collector’s Deed.

This factor does not render the fair market value to be what was paid at the tax sale. Any defect in title as a result of the seller having title by a Collector’s Deed is curable. It is not a physical feature of the land which renders the property less valuable. It is not an external factor to the land which reduces its value. It is simply a title issue which is curable so that fee simple title can pass.

If Complainant’s line of reasoning is carried to its logical extent, then a purchaser at a tax sale would be able to pay a greatly reduced amount of taxes year after year, because he had elected to not file a quite title suit so that a title company would not issue a policy of title insurance. This would mean that a tax sale purchaser with adequate capital could buy an unimproved property, substantially improve it and increase its value many times over the price paid at the tax sale, but simply continue to refuse to file a quiet title action. The result under Complainant’s theory would be that the property would not be valued at fair market value because title is held only under a Collector’s Deed.

At the very most giving some degree of validity to Complainant’s argument, a well informed buyer would insist on marketable title being established. This in no way prevents the hypothetical sale on January 1, 2005, that is the basis for valuation. Parties enter into contracts day in and day out to transfer land subject to marketable title being established. The actual closing may not occur until months after the parties agree to the sale price. Real property is appraised for ad valorem tax purposes assuming fee simple (marketable title), the fact that an impairment to title would need to be cured does not establish that the property is to be valued at something less than its true value in money. Complainant failed to present any evidence or verification from any authoritative source that property is to be valued at some amount less than its fair market value because of what amounts to curable issues relating to title. The listing for sale of the property for $88,000 by one of the principals of Complainant (an owner) gives rise to an inference that this licensed real estate agent understood that the property was in fact marketable, notwithstanding that some action might be required to be able to convey a clear title.

Summary and Conclusion

Complainant failed to present an opinion of fair market value based upon any recognized standard or methodology for the valuation of real property. Complainant did not present any documentation from proper appraisal methodology that an adjustment is required to be made for clearing title. Complainant’s evidence did not meet the required standard of substantial and persuasive to rebut the presumptions of correct assessment and establish fair market value.

Respondent’s Burden of Proof

Respondent, when advocating a value different from that determined by the original valuation or a valuation made by the Board of Equalization, must meet the same burden of proof to present substantial and persuasive evidence of the value advocated as required of the Complainant under the principles established by case law. Hermel, Cupples-Hesse, Brooks, supra. The evidence presented in this appeal on behalf of Respondent through Mr. Frumson’s appraisal met the standard of substantial and persuasive evidence to establish the fair market value to be $69,000.

ORDER

The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for St. Louis County for the subject tax day is SET ASIDE.

The assessed value for the subject property for tax years 2005 and 2006 is set at $13,110.

A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing of such decision. The application shall contain specific grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial. Section 138.432, RSMo 2000.

If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of St. Louis County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal. If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.